Earlier this month, the public consultation for the Circular Business Act was opened by the European Commission. With a planned adoption at the end of 2026, the act will bring Europe to the forefront of the circular economy, creating a single market for secondary raw materials, doubling the EU’s circularity rates and making Europe a world leader within the circular economy by 2030.
We all know that change is needed when it comes to our depletion of the earth’s finite natural resources but is the circular economy the answer? At odds with our capitalist society grounded in a mantra of ‘make, take, waste’ (quite a contrast from the ‘reduce, reuse, recycle’ slogan we’ve all been taught from school), how does the circular economy make businesses any money?
Here’s our take.
What is the circular economy?
For the most part, companies operate in a linear way – taking resources from the earth, making products and leaving the end user to dispose of them when they are done. In contrast, the circular economy promotes the reuse of products to extend their lifecycle or the lifecycle of the raw material.
In its simplest form, you take your raw materials, create your product and then recycle it at the end to be reused in the creation of a new product. Crucially, the circular economy makes companies accountable for the full lifecycle of their products, rather than the point at which they leave the shelves.
Unlike the linear model which is wasteful and rather uninspiring, there are plenty of creative ways for businesses to stay committed to the environment while also generating revenue.
Since recycling is an energy-intense activity, some suggest that it should be the last resort within the circular economy. Instead, consumers should try to hold onto products as long as possible, repairing them with the help of the origin company to extend their lifecycle.
But how do you make money when your customers are repairing and reusing your products instead of buying new ones? By altering the way that you do business. There are three business models in the circular economy:
- Access over ownership
Rather than a customer purchasing one of your products, you instead sell them access. Your business then becomes a rental service where you maintain ownership of your products once your customers are done to resell, reuse or recycle. - Life extension services
Adding product life extension services to your business, like a clothes repair service, means that you can add an extra income stream to your business, making it more profitable. For example, not only does H&M offer a repair service but they also sell products, like cotton patches, to allow customers to repair their own clothes at home. - By-products as raw materials
Rather than producing from raw materials, switching to by-products puts you right in the heart of the circular economy and allows you to benefit from someone else’s business chain. A great example of this in action is UpCircle whose products are not only zero waste but also refillable.
How does it benefit the planet?
A core benefit of the circular economy is the preservation of natural resources and the capacity to allow nature to regenerate. Using secondary raw materials and extending the lifecycle of products creates less stress on our environment and better outcomes for the planet, including ourselves.
According to the Ellen MacArthur Foundation, the adherence to a circular business model could reduce 9.3bn tonnes of CO2e in the cement, steel, aluminium, plastics and food industries alone by 2050. It could also reduce the use of primary raw materials in Europe, China and India by up to 71% and reduce the amount of plastic leaking into the ocean by up to 80%.
How does it benefit business?
These environmental benefits translate into big wins for business. According to Deloitte:
“Environmental sustainability remains a top concern for Gen Zs and millennials, with 62% of Gen Zs and 59% of millennials reporting feeling anxious or worried about climate change in the past month.”
This is not only important for businesses who want to sell to Gen Z and Millennials – a large part of the population today – with Deloitte stating:
“They also actively research the environmental practices of companies they purchase from and are willing to pay more for sustainable products.”
It’s also important for those seeking new employees. Nearly half of all Gen Z and Millennials surveyed by Deloitte say that they have either changed jobs or were looking to change jobs to work in an industry, company or role that aligns better with their environmental values.
Furthermore, according to the BrandZ database from Kantar, companies with a strong corporate reputation have 57% faster brand value growth. So, companies that are operating on a circular model look particularly attractive.
But it’s not just people that reap the benefits of a circular economy move, it’s profits too. By operating in a circular way, businesses are less dependent on natural resources and raw materials. Instead, secondary raw materials already exist within the supply chain which lowers the risk of limited resources and can also lower costs for acquiring these products. In addition to this, promoting and monetising product repair means also generating new income streams.
What does it take to make the circular business model a success?
There’s no doubt that the circular economy is attractive for people, planet and profits but it takes a willingness to change. Since there are so many businesses and industries still operating in a linear fashion, striking out from the norm requires work and commitment.
Perhaps one of the most important factors is changing consumer behaviour. We’re all responsible for the environment but human nature has us trapped in a cycle of quick comforts and easy wins. It means people are more interested in having the latest, trendiest or newest product over repairing something they already own. And this is where the marketer comes in.
Typically, a marketing team is responsible for lead generation and converting prospects to purchase. Once the product is off the shelves, their work is done. However, in a playbook published alongside Kantar, the Ellen MacArthur Foundation suggests that the marketer will have a much more involved role with the circular economy. It will be on marketing teams to make consumer behaviour consistent with the circular economy seem attractive. It’s a task that will continue through the entire customer journey.
How to transition into a circular business
Transitioning into the circular economy requires an in-depth analysis of your entire supply chain and making changes that keep products and materials within a closed loop of operation.
Striking out alone to do this can take work and, without the right support, you might find yourself struggling to put aside the time that it takes. That’s why businesses like ours exist. Astraia’s team of business experts will help you through setting up circular business practices, collecting the right documentation, legal advice and supporting you through your marketing journey too.
If you’re interested in making the move to a more sustainable strategy, get in touch.
Sources:
https://www.ellenmacarthurfoundation.org/marketing/overview
